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Research: Healthcare
MagForce continues to pursue its two-pillar strategy to drive uptake of its nanotechnology-based thermal ablation treatment, NanoTherm. In the United States, MagForce has received FDA approval to start Stage 2b of its pivotal study in prostate cancer. The study is expected to complete in mid-2022 and we now anticipate approval and launch in H123 (versus H122 previously). This is a key value inflection as long-term growth depends on US approval. In Europe, NanoTherm is approved for glioblastoma (brain tumours) and progress in H121 has been hampered by COVID-19 and the continued forced closure of treatment centres. Treatments have now resumed in H221 and management is confident that it can regain sales momentum as pandemic headwinds abate.
Written by
Sean Conroy
MagForce |
Primed to execute on its growth strategy
Healthcare equipment & services |
Scale research report - Update
10 November 2021 |
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MagForce continues to pursue its two-pillar strategy to drive uptake of its nanotechnology-based thermal ablation treatment, NanoTherm. In the United States, MagForce has received FDA approval to start Stage 2b of its pivotal study in prostate cancer. The study is expected to complete in mid-2022 and we now anticipate approval and launch in H123 (versus H122 previously). This is a key value inflection as long-term growth depends on US approval. In Europe, NanoTherm is approved for glioblastoma (brain tumours) and progress in H121 has been hampered by COVID-19 and the continued forced closure of treatment centres. Treatments have now resumed in H221 and management is confident that it can regain sales momentum as pandemic headwinds abate.
US prostate cancer study enters pivotal stage
MagForce has received FDA approval to commence the final stage of the pivotal US study. Stage 2b will enrol 100 patients in a single arm to establish efficacy in thermally ablating prostate cancer lesions using the streamlined, one-day protocol. The study is expected to complete in mid-2022 and MagForce will start commercial preparations to have five proprietary treatment sites ready for potential approval and launch in H123. MagForce’s renewed US commercialisation strategy will utilise company-owned and operated treatment sites and allow it to significantly increase revenues per patient and generate higher margins from billing the entire procedure, versus solely suppling NanoTherm.
EU poised to recover after COVID-19 slowdown
Progress in 2021 has been hampered by the closure of treatment centres in H121. Revenues from the commercial treatment of patients in Germany and Poland (H121: €112k vs H120: €326k) suggest five patients were treated in this period. Treatments have now resumed in H221 with management guiding for c 30 patients treated in FY21, a slight increase from FY20 (23 patients) but still below pre-pandemic expectations of 90–120 patients. The roll-out strategy in European has also resumed. In September, the first collaboration agreement in Spain was announced and should enable commercial treatments from H122. MagForce is also in advanced negotiations with potential partners in Italy, Austria and Germany and expects to have eight operational treatment centres across Europe by end-2022.
Valuation: Timely roll-out in the EU and US is key
MagForce’s market cap is €102m with an EV of €128m. Growth in European sales, driven by reimbursement and the ongoing roll-out of devices, as well as the potential launch in the United States, will be key to crystallising value.
Historical financials
Source: MagForce accounts |
Edison Investment Research provides qualitative research coverage on companies in the Deutsche Börse Scale segment in accordance with section 36 subsection 3 of the General Terms and Conditions of Deutsche Börse AG for the Regulated Unofficial Market (Freiverkehr) on Frankfurter Wertpapierbörse (as of 1 March 2017). Two to three research reports will be produced per year. Research reports do not contain Edison analyst financial forecasts.
Financials
MagForce AG (MagForce) is the parent company of the MagForce group, which consists of seven companies including MagForce USA, and the wholly owned regional sales subsidiaries MagForce sp. z o.o. in Poland and MagForce Nanomedicine S.L. in Spain. Under HGB accounting standards, MagForce does not report consolidated financial statements, and thus MagForce USA is not currently consolidated as per company reporting and our financial forecasts.
MagForce’s revenues amounted to €191k in H121 (H120: €384k), reflecting a significant decrease in the commercial treatment of patients in Germany and Poland to €121k (H120: €326k) due to the continued forced closure of treatment centres in the period. NanoTherm deliveries to subsidiaries were relatively flat at €79k (H120: €58k) and pertain primarily to supply for the US prostate cancer study. Treatments resumed in H221 and management is confident that it can regain sales momentum as pandemic headwinds abate and the planned opening of additional European sites resume. Treatment sales have historically been hampered by local reimbursement issues. However, management has estimated that it has the necessary number of patient outcomes to negotiate reimbursement in Germany, and the planned Health Technology Assessment application implies that federal reimbursement could start during H222. In Poland, an investigator-initiated trial has started at the Lublin treatment centre to enable an application for reimbursement in this territory.
Loan facilities bridge gap until profitability
The increase in other operating income, reported at €769k in H121 (H120: €384k), was primarily attributed to the reversal of provisions recognised for share price-linked liabilities. Personnel expenses remained stable at €2.0m (H120: €2.1m) and reflect expenses for wages, salaries and retirement benefits. Cost of materials and services increased to €468k (H120: €286k), likely due to preparations for the launch in the United States, while other operating expenses were down slightly at €1.4m (H120: €1.7m) due to lower capital raising costs. Reported operating income in H121 stated a loss of €3.2m (H120: €3.4m). While management expects a significant increase in revenues from commercially treated patients in Europe in FY21, due to the continued expenses from the European expansion strategy, management expects a sustained operating loss in FY21.
MagForce reported cash and cash equivalents of €650k at 30 June 2021. In March 2021, it signed an agreement with Apeiron Investment Group for growth financing of €2.5m via convertible notes (5% interest and 24-month term) and has received €1.9m in cash to date. MagForce will require additional funding until break-even and we expect that this will be drawn from the remaining €11.0m zero interest-bearing convertible notes with Yorkville or the remaining €22.0m of the EIB loan facility. In H121, interest expenses increased to €1.4m (H120: €1.0m) due to the issuance of further convertible notes and higher interest on existing financial liabilities. At 30 June 2021, MagForce had net debt of €26.0m.
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Research: TMT
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